Jack Lucas is a shock jock in New York City. One day he takes a call from a listener who feels sad about being rejected by a woman at a "yuppie" restaurant. Jack tells the caller to put it out of his mind, that he'll never fit in with that set. Later that evening, as he prepares to shoot a sitcom the next day, Jack hears on the news that there has been a mass shooting at the "yuppie" restaurant, and the listener from earlier that day was the shooter.
Jack blames himself for the man's unraveling. Three years later, he is no longer on the radio and is incredibly depressed. Now he lives with a video store owner called Anne and works in her store part-time. That night, Jack and Anne watch a television show that Jack produced about his experiences on the radio, Jack picks a fight with Anne and tells her he is only with her for sex. Anne storms out of the apartment and Jack leaves too, taking a bottle so that he can keep drinking. He is mistaken for a bum and ends up under the Manhattan Bridge, with plans to jump in the East River. Before he can jump he is attacked by a couple of young men who think he is a homeless man. They douse him in gasoline and plan to set him on fire. They are interrupted by a vagrant who wields a bow and arrow and speaks in the manner of a Medieval knight. The knight, along with some other bums, scares the teenagers off. Drunk and confused, Jack ends up spending the night in the homeless man's basement lair.
The next morning, the bum introduces himself as "Parry," a knight on a sacred quest to find the Holy Grail. Parry is convinced that the Grail is kept in the home of a renowned archaeologist who lives on the Upper East Side. Parry believes that Jack has been sent specifically to help him find it, but Jack tells Parry bluntly that he is crazy and leaves. In the hall, Jack runs into the building manager, who tells him that until several years ago Parry used to live in an apartment in the building with his wife, but she was murdered in the shooting at the restaurant three years earlier.
Jack decides that if he helps Parry, his own depression might go away and he will be relieved of his guilt. He goes back to Parry's home and the building manager fills him in on Parry's background. His real name is Henry Sagan, and he was a professor of medieval studies at Hunter College. After his wife's murder, he became catatonic and was committed to an insane asylum on Staten Island. When he emerged from his catatonic state he had become Parry. Later that day, Jack finds Parry sitting on top of a parked car in midtown. Jack tries to give him some money, but Parry just gives it to another homeless man before grabbing him to spy on his crush, Lydia, who is exiting an office building nearby. Parry tells Jack he really likes Lydia but isn't confident enough to talk to her, when suddenly Parry has a hallucination, seeing a terrifying Red Knight. Jack chases Parry into the park, and they come upon a homeless man who has buried himself in the dirt tracks of the riding path in the hope that he will get trampled by horses. They take the man to a shelter and Jack learns that he used to be a cabaret singer, who lost many of his friends in the AIDS epidemic.
Back in Central Park, Jack and Parry lie on the Great Lawn and Parry tells Jack the story of the Fisher King who once possessed the Holy Grail but lost it and grew old and depressed. The king was saved by a passing fool who gave him a drink of water out of the Holy Grail. Jack realizes he needs to help Parry on the quest for his own Holy Grail, and tries to find a way to introduce him to Lydia. Jack poses as a contest official and tells Lydia she has won a free membership to Anne's video store, eventually luring her to the store. Although Lydia doesn't find any movies she wants to rent, she does notice Anne's nails and asks if Anne will give her a manicure. They invite Lydia to come to the apartment that night, planning a double date. Jack gives Parry his wallet so he can pay for dinner. They all go out for Chinese food and the matchmaking is successful. At the end of the night, Parry walks Lydia home and convinces her of his love. As he leaves her home, however, he is once again struck by panic and sees the Red Knight coming towards him. He runs away and ends up under the Manhattan Bridge, where he is attacked by the teenagers from earlier. The next morning, as he is breaking up with Anne, Jack receives a call from the police because they found his wallet on Parry when he was brought into the hospital. Jack visits Parry at the hospital, who is in a catatonic state and needs to be taken to a mental hospital.
Jack calls his old agent and manages to get back on the radio, leaving Anne and Parry behind. In the middle of a meeting with a television producer, Jack leaves to visit Parry, whom he tries to awaken from his catatonic state. Jack then promises him that he will undertake the mission to find the Holy Grail and reclaim it. He goes to the apartment of the archaeologist and retrieves the Grail, which is actually just a trophy from the archaeologist's childhood. He brings the Grail to Parry, which awakens him. Parry tells Jack that he really misses his wife.
The next day, Lydia goes to visit Parry and finds him leading his fellow patients in a hearty rendition of "What About You?" Parry spots her and sees that she is crying, and hugs her. Meanwhile, Jack tells Anne that despite his earlier claims he really does love her. She takes him back.
